Batista Loses Quarter of Fortune on Pledge for Loans

Eike Batista, founder and chairman of OGX Petroleo & Gas Participacoes SA. His fortune has plunged from a peak of $34.5 billion last year after he repeatedly failed to meet targets he had set for his startup companies. Photographer: Patrick Fallon/Bloomberg

July 4 (Bloomberg) -- Brazilian billionaire Eike Batista
lost more than a quarter of his net worth after the state
development bank said he offered personal guarantees for 2.3
billion reais ($1 billion) in loans and a rout of his publicly
traded companies deepened.

Batista is now worth $2.9 billion, down from $4.1 billion
at the close of trading July 2, according to the Bloomberg
Billionaires Index. The loans are part of the 10.4 billion reais
that Batista’s companies contracted with the state-run lender,
known as BNDES, since 2007. BNDES provided the tally of the
loans and their respective guarantees in response to a request
by Bloomberg under Brazil’s freedom of information law. The bank
didn’t say how much is outstanding.

Batista’s fortune has plunged from a peak of $34.5 billion
last year after he repeatedly failed to meet targets he had set
for his startup companies. The latest disappointment came when
his flagship OGX Petroleo & Gas Participacoes SA said July 1
that it may shut down its only producing oil field, prompting a
selloff that’s since erased $1 billion in market value from his
six publicly traded units.

“They can go after his personal assets, the car he bought
for his children and so on,” said Ray Zucaro, who helps oversee
$350 million of emerging-market debt at SW Asset Management in
Newport Beach, California. “The nice thing about a corporation
is that if the corporation goes away, the assets they can get
are contained within that. This is more problematic for him.”

Most Exposed

Investors are trying to gauge the potential fallout after
OGX’s warning prompted Standard & Poor’s and Moody’s Investors
Service to cut their ratings on the company’s debt on concern it
won’t have cash to pay its creditors. OGX’s bonds fell to a
record low 19 cents on the dollar before rebounding to 22 cents
yesterday.

The information provided by BNDES follows a July 1 report
from Bank of America Corp. that estimated that the Rio de
Janeiro-based lender was the most exposed of Brazil’s banks to
Batista’s companies, having lent 4.9 billion reais, or 5.8
percent of the bank’s regulatory capital. Analyst Alessandro
Arlant, whose estimate is based on regulatory filings from
Batista companies, wrote that such findings may understate risks
to the banking system because information and disclosure is
poor.

Loan Details

BNDES, in its written response to Bloomberg’s request,
declined to say how much of the loans were disbursed and repaid,
citing bank secrecy laws that prohibit the disclosure of such
information. BNDES didn’t specify what personal assets Batista
used to guarantee debts with the bank. A spokesman for BNDES in
Rio de Janeiro declined to comment further.

A press official in Rio for EBX Group Co., Batista’s
holding company, declined to comment on the loans or his wealth.
EBX said on June 13 it had restructured an unspecified amount of
debt, leaving it with only long-dated liabilities.